2008 (10) TMI 104 - AT - Service Tax

Appellant plea is that service tax under the head CHA service was payable only on the agency charges recovered from their clients and the same was not payable on statutory charges and reimbursable expenses - appellants have a case on limitation in respect of the entire demand - no prima facie case on merits against the demand of service tax under the head BAS for the normal period stay not granted completely

Summary

Issues:
1. Demand of service tax for the period 2002-'03 to 2006-'07.
2. Contestation of demand on merits and limitation.
3. Interpretation of service tax liability on 'CHA service' and 'Business Auxiliary Services (BAS)'.
4. Application of Trade Notice No. 5/97-S.T. and its withdrawal.
5. Pre-deposit requirement and compliance.

Analysis:
1. The Commissioner demanded service tax of over Rs. 5.8 crores from the appellants for the period 2002-'03 to 2006-'07, including penalties under the Finance Act, 1994. Approximately 50% of the demand was beyond the normal period of limitation. The appellants contested the demand on both merits and limitation.

2. On merits, the appellants argued that service tax on 'CHA service' was only payable on agency charges, not on statutory charges or reimbursable expenses. They relied on Trade Notice No. 5/97-S.T. and a previous decision in their favor. The demand under 'BAS' was contested on the basis that the levy was on the differential amount between payments to Airlines and amounts collected from clients.

3. The Tribunal assumed a case on limitation for the demand beyond the normal period. The demand for the normal period was approximately Rs. 2.5 crores, with Rs. 1.7 crores under 'CHA service' and Rs. 85 lakhs under 'BAS'. The appellants argued that the demand was not solely on amounts collected but also on amounts 'payable'. The Tribunal directed a pre-deposit of Rs. 40 lakhs for the demand under 'BAS' for the normal period.

4. The Trade Notice relied upon was withdrawn, but the appellants referenced a co-ordinate Bench decision in their favor. The Tribunal considered the arguments and estimates provided by both sides and found no prima facie case against the demand of service tax under 'BAS' for the normal period. Therefore, the appellants were directed to comply with the pre-deposit requirement.

5. The Tribunal's decision was dictated and pronounced in open court, emphasizing the need for the pre-deposit of Rs. 40 lakhs within a specified timeframe for compliance.